Monday, October 03, 2011

Management By Wishful Thinking #163: Kurkjian's Krazy Kwack-Up  

Making a prediction on significant events that have significant unknowns that play into the outcome, and you're likely to be made a fool. Beyond Baseball you see this a lot, most often in the corporate world, more often than not in corporate social structures where the system doesn't hold people accountable.

Virtually all organizations need to apply analysis to strategy. The most transparent billion-dollar endeavor is Baseball, so Baseball makes for some pretty clear examples of strategic planning and allocating resources from the results.

Major league baseball teams, with rare exceptions, use advance scouts to capture and analyze data about upcoming opponents. The scouts summarize this into information that their team uses to plan for immediate series, as well as keep it archived as part of a baseline of information for later tussles.

For teams that are likely to make it into the playoffs, this effort starts being more critical around mid-September. In most years, it's becoming obvious which opponents are the most likely. This'll sound like a big "duh", but playoff-bound (or still-playoff hopeful) teams have access to a limited pool of skilled advance scouts, so allocate them to the games/teams stochastically: They neither choose a single-most likely opponent and put all their resources into one (a deterministic approach), nor do they allocate an equal fraction to every single team that hasn't yet been eliminated (a random approach). With their stochastic approach, they are most likely to pay some attention to all possible opponents, but invest proportionally more in scouting most likely opponents (tweaked by how much they've been playing against them recently and have on hand immediate intel) . 

Well, yes, that is a big "duh", but in the corporate world, this tends not to work as elegantly. There's an entire field of study on this, and some useful, applicable research, such as the paper "Detecting Regime Shifts: The Psychology of Under- and Over-Reaction" by Cade Massey & George Wu, available here. Over- and under-investment in allocating analysis is a daunting problem in corporate social structures, because of Angus' First Law of Organizational Behavior: in general in corporate systems, accumulated leadership tends to be individuals who diminish accountability (something Baseball can't allow).

If the probabilities are murky because there are a lot of uncertainties operating or if the events are based on a small number of binary outcomes, or both (for example, any October best of 5- or 7-game baseball series; think, for example, of the 1995 Cleveland Indians, the strongest team of the previous 20 years, getting shredded in the Series that year by a perfectly-fine-but-not-exceptional Atlanta Braves team) corporate analysts tend to "freeze up". The risk becomes high of choosing incorrectly, and more often than not in the corporate world, leadership's cognition will devolve into MBWT (Management By Wishful Thinking) as an energy-conservation tack -- that is, why invest a lot of intellectual effort when the outcome is uncertain -- just go with your gut...and your gut is driven by hopes and wishes.

You won't see a lot of this in Baseball management. But there was a howler last week when, thanks to fate and relentless baseball practice, both the American League's and National League's wild card teams, and therefore all four playoff set-ups, were in flux going into the 162nd (last) game of the season. So there's a great example of it around Baseball.

One of the most experienced and bright Baseball pundits, ESPN's Tim Kurkjian, talked about going into the last day of the regular season, with the extraordinarily strong finish of the Tampa Bay Devil Rays  (behind by 9 wins for the wild card with 26 games to play) tied for the wild card with the Boston Red Sox in the A.L., and the Struggling Atlanta Braves tied for the same pseudo-honor with the surging St. Louis Cardinals. 

Neither league's wild card contenders were playing against each other, so the results of four different games would decide the regular-season outcome. If in either league both contenders had the same game outcome (a win or a loss), they would have to play a one-game head-to-head tiebreaker, but if one league contender lost while the other won, that would be the decider.

In all four games, the contender's opponent had zero "incentive" to win, except as a spoiler, so Kurkjian's assumed they'd be easy pickings, that all four contenders would win. And in the corporate world, or even in other endeavors that are less competitive than Baseball, say the NFL, that might be probable. In Baseball, though, Jocketty's Law applies: Whatever doesn't make you stronger, kills you.

Really, though, what the pundit was hoping for was that all four contenders would win so there could be an additional day of intense, winner-take-all baseball. Not a bad hope...it would have been fun, but the odds were against it

The Red Sox faced their division's "doormat", the Baltimore Orioles, so Kurkjian was probably as safe in choosing that outcome as in any of the four contests. But there were two factors he chose to ignore: Baltimore was playing at home where they had been 5-4 against the Sox during the season (certainly not roadkill), and O's manager Buck Showalter's relentless determination to squeeze every possible gain/win out of every moment/game. He didn't exactly ignore a third factor, the Sox' 17-27 play since August 10th, but he dismissed it as ephemeral. The O's refused to play dead, and came back in the 9th inning with some serious heroics.

Kurkjian didn't under-rate the quality of the Devil Rays' opponents, the New York Yankees, but he did grossly underestimate two factors that affected the Yanks' determination to win. First, the Gothamites were already in the playoffs, meaning if they lost to the Devil Rays and the Tampa team faced them later in the championship series, their opponent would have a psychological advantage, perhaps not massive, but in a system where whatever doesn't make you stronger kills you, not to be ignored. Second, the Yankees, from both a pride and profit position, practically prefer playing the Red Sox (a legendary rivalry with both richer revenues and blood lust at stake). So the Yankees weren't going to roll over, even if they weren't going to compromise their playoff chances by squandering their best starting pitcher or reliever in the effort. The Yankees put away the Devil Rays early but Joe Maddon's relentless and loose squad came back and won it in 12 innings.

In the National League games, he did the same, presuming the Braves' 11-19 record since August 24th was a short-lived swoon and that they would rise to the occasion. The Braves were certainly an appealing and skilled team, but they were playing the team with the best record in Baseball, the 101-61 Philadelphia Phillies (and you don't get to 100 wins without playing every pitch for keeps). The Phils, further, had the same incentive the Yankees had; the need to win for psychological advantage in case the Braves would make it into the championship series against them. The Phils wouldn't lie down and they beat the Braves in 13 innings.

It was certainly the most exciting last day of regular season baseball in my lifetime, with four games that absolutely counted, three of which were decided in the 9th or later inning.

But in his MBWT, the pundit ignored completely the Baseball precept he absolutely has every reason to know and internalize: Jocketty's Law.

The next time you have to engage in strategic planning, don't fall into Kurkjian Kraziness. Do what analysis you can do, and be prepared that with a lot of competitive uncertainty, you could be wrong. Just because the outcome is fuzzy, do not allow yourself to surrender to Management By Wishful Thinking because it's much easier than serious analysis.

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